Regeneration of bone for fracture repair relies on the number of chondro-osteoprogenitors recruited to the fracture site. An impairment of the fracture healing process is reported in 10% of the 6.2 million fractures occurring annually in the United States, leading to significant morbidity and mortality. Limitation of stem cell number and imbalance between anabolic and catabolic hormones and growth factors are key elements in determining fracture repair failure. Formation of a cartilage template is essential during the fracture repair process. Adult bone marrow (BM) contains a reservoir of mesenchymal stem cells (MSC) with in vitro and in vivo potential of becoming cartilage. However, the molecular signals and growth factors that convert MSC from the process of self-replication to that of chondrogenic differentiation are unknown. Our long-term objective is to understand the molecular mechanisms that determine the regenerative potential of MSC to devise more effective therapies to ameliorate the fracture healing process. Our studies demonstrate that transforming growth factor beta (TGF-beta) and insulin-like growth factor-l (IGF-I) determine the chondrogenic potential of MSC by inducing chondroprogenitor condensation, growth and differentiation into chondrocytes. We have also demonstrated that MSC when systemically infused are specifically recruited to the fracture site where they differentiate into chondrocytes. We hypothesize that TGF-beta and IGF-I have anabolic chondroinductive effects in the cartilage formation process derived from MSC. We further hypothesize that the chondroinductive actions of TGF-beta and IGF-I can be used to engineer MSC to promote the fracture healing process. The two Specific Aims of this proposal are:1) to discover the mechanisms by which TGF-beta and IGF-I determine the MSC chondrogenic potential;2) to determine the role of TGF-beta and IGF-I in the fracture repair capacity of MSC. To accomplish these specific aims, proposal will combine structural biology, biochemistry, mouse models and molecular imaging techniques for tracing MSC in vivo. We expect that the results of this multi-faceted experimental approach will provide greater understanding of the basic biology and regenerative capacity of MSC. Understanding the role of TGF-beta and IGF-I in the chondrogenic potential of MSC will provide critical information for the development of an ex-vivo MSC-based TGF-beta and IGF-I delivery system capable of potentiating fracture healing.